Gates Strips AF of Tanker Contract Decision

9 Jul 2008

Defense Secretary Robert Gates has stripped the Air Force of authority to decide who will get the new contract award for the KC-X tanker.

Gates, who made the announcement at a Wednesday new conference, said the Pentagon hoped to issue a new contract before the end of the year. A partnership of Northrop Grumman and the European Aeronautic Defence and Space company was awarded the $35 billion contract in February. Boeing protested the contract award and the Government Accountability Office sustained Boeing's protest.

Undersecretary of Defense for Acquisition, technology and Logistics John Young will make the contract decision, Gates said. Also, there will be a new advisory commission overseeing the new contract process, Gates said. Young, who spoke later in the press conference, said that once the contract is awarded he expects the Air Force to resume management of the program, signaling that service still retains the fundamental confidence of the Pentagon's senior acquisition officials.

But Congress is going to play a major role in this rebid and the defense secretary made very clear he knew Congress would be watching, noting that his office had informed the main congressional committee leaders of his decision earlier in the day.

Soon after Gates' spoke, Boeing supporter Sen. Maria Cantwell (D-Wash.) kept the pressure on with a statement calling for "a real bid not a rehash," adding that "Congress must play a strong oversight role…." She repeated a call made in a July 7 letter to Sen. Carl Levin (D-Mich.), chairman of the Senate Armed Services Committee, and Sen. John McCain (R-Ariz.), for a full Armed Services Committee hearing to consider "several classified issues of concern that must be fully investigated" relating to the tanker deal. In her latest statement Cantwell said that if the Defense Department does "not address these concerns, it's a non-starter and I will place a hold on the nominations of the Secretary of the Air Force and ask that this information be declassified for public debate. This issue is too important to have another whitewashed contracting process."

Sen. Richard Shelby (R-Ala.) who wants to see Northrop Grumman's tanker jobs come to his state, said Gates' decision was "the best of all options," adding that the plan is "an appropriate solution to remedy the minor procedural flaws the GAO found in the initial award."

The chairman of the House Armed Services Committee, Rep. Ike Skelton (D-Mo.) issued a short statement saying he had spoken with Gates this morning and had "confidence in Secretary Young and I hope he can assemble the right people to move ahead with this important contract in a reasonable period of time."

For its part, Boeing issued cautious praise for Gates' decision.

"We welcome the decision by Defense Secretary Robert Gates not to proceed with the contract award to Northrop Grumman/EADS and to reopen the KC-X tanker competition," a company official said in a statement. "However, we remain concerned that a renewed Request for Proposals (RFP) may include changes that significantly alter the selection criteria as set forth in the original solicitation."

Northrop was slightly more upbeat in its reaction. "We are reviewing the decision to ensure the re-competition will provide both companies a fair opportunity to present the strengths of their proposals," Randy Belote, vice president of communications, said in satement. "The United States Air Force has already picked the best tanker, and we are confident that it will do so again."

Michael Donley, acting Air Force Secretary, spoke after Gates and tried to puncture one of the increasingly common assumptions arising from the Government Accountability Office's criticisms of the Air Force decision to award the tanker deal to Northrop Grumman, that the Air Force's acquisition system is broken. He conceded the "need to rebuild confidence in" the military's ability to award and manage large contracts but said he did not believe the Air Force's systems was "fatally flawed."

He and Gates noted that only eight of the 100 issues raised in Boeing's protest were "significant," though they were careful not to downplay the serious nature of some of the GAO findings. Gates noted that the Pentagon "will address all of these" eight issues in its rebid.

Donley said all the services needed to tighten up acquisition processes because there are likely to be more protests as there are fewer new programs and tighter budgets likely in the future. "The Air Force needs to rapidly apply the lessons learned from this [protest decision] and move forward," Donley said.

With today's announcement, Gates appeared to be trying to get ahead of any congressional steamroller on the tanker deal, since the House Armed Services air and land forces subcommittee has its tanker hearing scheduled for Thursday afternoon.

The one thing everyone involved appears to agree on is that the Air Force needs new tankers as quickly as humanly possible.